Coffee looking for rebound on possible bottom

General Comments: Futures were mostly a little lower in Sao Paulo and New York, but higher in London. Charts still show that all three markets are trying to complete a bottom and might have got the job done. There is more and more talk that the market is getting ready to rally in New York after all the selling seen in the past months. Speculators have been very short and all the news has pointed to lower prices, so it would not take much in the way of bullish news to change the short term trend. Current crop development is good this year in Brazil, and production areas are getting beneficial rain for the developing crop. However, some are noting dry conditions in northern production areas. Central and northern Brazil are expected to get some rain this week, though, and some central areas got some rain yesterday. Central America crops are getting harvested, and conditions are called good there. There are widespread reports of rust on the trees and leaves, and Roya has become a big issue as well. It is possible that many Central America and Mexico producers will harvest much less Coffee next year if they are affected by this disease, and many seem to be affected. We are already hearing significant loss estimates for the next crop due to Roya. Colombia is reported to have good conditions.

Overnight News: Certified stocks are lower today and are about 2.5898 million bags. The ICO composite price is now 138.10 ct/lb. Brazil should get scattered showers and storms through the weekend. Temperatures will average near to above normal. Colombia should get mostly dry conditions, and Central America and Mexico should get mostly dry conditions, but a few showers are possible in central and eastern Mexico. Temperatures should average near to above normal.

Chart Trends: Trends in New York are mixed to up with objectives of 158.00, 1609.00, and 170.00 March. Support is at 149.00, 146.00, and 143.00 March, and resistance is at 157.00, 160.00, and 162.00 March. Trends in London are mixed to up with objectives of 2100 and 2290 March. Support is at 1945, 1930, and 1910 March, and resistance is at 1975, 1990, and 2000 March. Trends in Sao Paulo are up with objectives of 199.00 March. Support is at 187.00, 184.50, and 183.50 March, and resistance is at 193.50, 195.00, and 196.00 March.

COTTON

General Comments: Futures were mixed to a little lower in consolidation trading. Traders were still reacting to the USDA reports. The domestic reports were bullish, but the world reports showed big supplies. There are still ideas that Cotton demand can hold strong and support U.S. prices. Some are wondering if planted area might be lower next year here in the U.S. because of weak prices against competing crops. The area lost would go mostly to Corn and Soybeans. Current weather features some precipitation in Delta and Southeast areas, but western Texas was mostly dry. Trends are not well defined on the charts, but ideas are that the market can continue to work higher overall. Wire reports indicate that the first Chinese auction of Cotton into the domestic market failed due to poor quality.

Overnight News: The Delta will be dry all week and Southeast will get showers or rains through Thursday, then will see dry conditions move from west to east the balance of the week. Temperatures will average near to above normal. Texas will get dry weather. Temperatures will average near to above normal. The USDA spot price is now 70.94 ct/lb. ICE said that certified Cotton stocks are now 0.101 million bales, from 0.100 million yesterday.

Chart Trends: Trends in Cotton are mixed. Support is at 74.40, 73.70, and 73.25 March, with resistance of 76.40, 76.95, and 77.05 March.

About the Author

Jack Scovilleis a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988. Jack writes daily commentaries - Morning Grains and Softs, in both English and Spanish and is regularly quoted around the world by news & wire services including Dow Jones, AP, Bloomberg, and Reuters. You can contact Jack by phone at (312) 264-4322 or by email at jscoville@pricegroup.com. Learn even more on our website at www.pricegroup.com.

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